Analysts Expect Record-Low Breeding Herd

Analysts expect the U.S. swine breeding herd to set a record low as the weak economy and concern over demand have kept expansion plans in check.

Animals kept for breeding as of June 1 are expected to decline about 3.5 percent from 5.968 million head a year earlier, based on a survey of analysts conducted by Dow Jones Newswires before the USDA’s Quarterly Hogs and Pigs Report.

The projected decline would leave the breeding herd, an indicator of future pork supplies, at 5.759 million head, the lowest since at least 1963, which is the farthest back the USDA tracks the data. The USDA report is scheduled for release at 2 p.m. Central time Friday.

While a rally in hog prices this year restored pork industry profits after more than two years of losses, producers remain gun-shy about adding to their herds, analysts said. With unemployment high and the housing market weak, consumers may balk at higher-priced food.

“Everybody’s worried about demand,” said Bob Utterback, president of Utterback Marketing Services in New Richmond, Ind. “Everybody’s worried about where the economy’s going.”

Among pork producers, “nobody wants to stick their head out any further than they already have,” Utterback said. The USDA report probably will reflect producers “hanging on, but not expanding,” he said.

If the breeding herd shrinks as expected, it would mark the ninth consecutive quarterly decline versus year-earlier levels stretching back to March 1, 2008, according to USDA figures.

From October 2007 through February this year, U.S. pork producer losses totaled $6 billion, according to an estimate from University of Missouri economist Ron Plain.

The total U.S. hog inventory as of June 1 is expected to be down about 3.1 percent from 66.81 million head a year earlier, based on the survey. That’s still up from March 1 inventory of 63.99 million head, which was the lowest in almost three years.

As pork supplies tightened, hog prices have almost doubled from late last summer, based on futures traded in Chicago.

CME Group lean hog futures for July delivery today fell 1.375 cents to 80.075 cents a pound. In August, hog futures sank to 43.575 cents, the lowest in almost seven years. The CME contract reflects carcass prices.

While hog inventories have declined, the impact on pork production has been mitigated to some extent because sows are producing more pigs per litter amid improvements in genetics and feed, analysts noted.

Pigs per litter have risen every year for at least 20 years, averaging 9.61 during the December-February period, according to USDA data.

“U.S. pork producers have maintained pig output even as they have slashed the size of the breeding herd,” livestock analysts Steve Meyer and Len Steiner said in a report today.

In another key USDA figure, the market hog inventory as of June 1 is expected to fall 3 percent from 60.84 million head a year earlier, according to the Dow Jones survey.